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Sterling edges down despite BoE hinting at slow hikes

There were no surprises in the Bank of England’s policy decision today to leave interest rates unchanged at 0.75%.

The real surprise was the bank’s latest growth forecasts which left the doors open for further tightening in the future. Sentiment over the UK economy is poised for a boost, given how economic growth is now projected to expand to 1.5% this year from the decade-low 1.2% predicted in February. While growth figures were revised higher, inflation figures were revised lower to 1.6% in 2019 and 2.0% in 2020. Overall, the Bank of England came across as cautiously optimistic but highlighted how Brexit continued to cloud the outlook for monetary policy. With the central bank likely to maintain a patience stance and closely monitor Brexit development before making any decision on interest rates, the Pound is seen edging lower in the short to medium term. Should economic data from the UK continue to improve and more clarity offered on Brexit, the BoE will have a valid argument for taking action. However, if uncertainty remains in the name of the game when it comes to Brexit – rates are likely to remain unchanged for the rest of 2019.

Looking at the technical picture, the GBPUSD is under pressure on the daily charts with prices trading marginally below 1.3050 as of writing. Sustained weakness below this point is seen opening a path back towards the psychological 1.3000 level.

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